Silicon Valley Firms, Congress Try to Stop IRS Plan to Tax Stock Options
washingtonpost.com
By Curt Anderson
AP Tax Writer
Thursday, May 9, 2002; 2:00 PM
WASHINGTON –– Corporate lobbyists and members of Congress are lining up to oppose a plan by the IRS to collect payroll taxes on stock options, a benefit used by high-tech companies and others to attract and motivate millions of employees.
Rules proposed by the Internal Revenue Service would impose the 15.3 percent tax that funds Social Security and Medicare on incentive stock options and employee stock purchase plans — reversing a 31-year-old IRS position on the issue. The rules would take effect Jan. 1.
Opponents say this amounts to a new tax burden, never authorized by Congress, that would disrupt a form of compensation affecting about 10 million people. Companies would face major administrative hassles as early as this summer, they say, and some employees might be forced to sell shares prematurely to pay the tax.
"Employees like to own a piece of the company. People can say, 'I'm part of this organization,'" said John Scott, director of retirement policy at the American Benefits Council, an industry trade group. "The financial disincentive of the tax itself, plus the higher administrative costs, might lead to less of these plans being offered." |
